Memphis CVB chief Kane on Beale club investments? No conflict, he says

May 16, 2013 - Police officers tape the nuisance petition to the main entrance of Club 152 on the west end of Beale. The club was shuttered by a nuisance petition following a months-long undercover operation in which officers allegedly purchased marijuana, cocaine, Percocet and Xanax from employees and patrons. (Mike Brown/The Commercial Appeal)

Kevin Kane

When the Memphis Convention and Visitors Bureau honored Elvis guitarist Scotty Moore on his 80th birthday, it showed the world Memphis knows how to party.

The CVB even hired Moore's favorite Beale Street rib joint, Blues City Café, paying more than $5,000 for drinks, food and service.

Behind the scenes, however, the December 2011 event rekindled an old, but little-known controversy that's bedeviled the CVB's charismatic CEO, Kevin Kane, for years.

Kane holds financial interests in Blues City Café and in another popular Beale Street nightspot, Club 152, both which benefit from tourism promotions by the taxpayer-funded CVB.

Kane says his business interests in the clubs pose no conflict, yet when authorities shuttered Club 152 for eight days earlier this month as a public nuisance after undercover officers detected illegal drug sales there, he knew he had a public relations problem.

"I was shocked and disappointed to learn that a business in which I have a financial interest has some employees, who allegedly broke the law,'' Kane wrote his board of directors following Club 152's May 16 closure. The club was allowed to reopen Friday following a deal with prosecutors that included assurances it would correct its problems.

Kane, 56, responsible for touting Memphis' image around the world now finds himself defending his own. In his letter to the board, he characterized his involvement at Club 152 as that of a "minority investor'' and a "passive investor'' who's "not involved in daily operations'' and who disclosed his Beale Street investments to the board when he first undertook them in mid-1990s — points he re-emphasized in an interview with The Commercial Appeal.

"Does Kevin Kane feel like he has a conflict? No. Because I have disclosed and I have been transparent about everything I do,'' said Kane, who receives a $237,000 annual salary and $341,000 in total compensation to run the CVB. The agency gets $7.8 million a year in local hotel-motel taxes — 94 percent of its budget — to promote the city as a tourist and convention destination.

"Even though I don't really get involved in (Club 152's) management. I'm going to be real vocal until I'm satisfied that all the right things are being done in something that I have an investment in,'' Kane said. "Or I will figure out a way to separate myself totally from that investment ...

"I'm going to be very involved to see what the steps are going to be taken ... to make sure that whatever issues are down there are dealt with.''

One of the issues of which Kane said he was unaware involves the criminal history of the club's manager, Wilbur D. Hensley, 58, who pleaded guilty in 1983 to two felony counts after he was arrested in possession of marijuana, cocaine and quaaludes. Records show he entered an Alford plea, in which a defendant may maintain his innocence while legally being rendered guilty, and was sentenced to a year in prison. The newspaper raised the issue of Hensley's criminal past in a 2007 investigation of Club 152 that noted Kane's ownership interest and repeated police reports evidencing drug use and violence at the dance club.

Hensley said last week his drug conviction occurred when he was "young and stupid'' and that he's turned his life around.

"I really think that is a non-issue,'' he said. Hensley was also found guilty in 1987 of stocking intoxicating liquor for sale, a misdemeanor. Records show no arrests in Shelby County since 1990.

Although Kane referred to Hensley as the club's "kind of like the main manager,'' and Hensley's Facebook site depicts him routinely inside the club, liquor license files reviewed by the newspaper made no mention of Hensley.

Club 152's three most recent annual applications on file with the Tennessee Alcoholic Beverage Commission, the agency that regulates establishments selling liquor by the drink, list Kelly Potter as the person "in active control in the management of the business.''

Legally, Hensley could manage the club because state law only precludes persons convicted of felonies within the past eight years, said ABC Director Keith Bell. However, Bell told a reporter it's troublesome Hensley isn't listed.

"The information we have does not indicate that this person has any ownership interest or management interest,'' Bell said. He said he "would welcome'' information to clear up the matter.

ABC records show Club 152 and Blues City Café are controlled by the same firm, Beale & Second Inc. According to Kane, he owns 20 percent of Beale & Second. Sixty percent is owned by longtime Memphis nightclub entrepreneur Gerald "Bud'' Chittom and 20 percent by former Ticketmaster general manager Charlie Ryan, Kane said. Real estate developer William "Rusty'' Hyneman had a share of the company, but sold it.

A review of the CVB's most recent three years of expense reports found no spending by Kane at Club 152, yet showed he and two employees had spent at least $6,100 at Blues City Café. A big chunk of that came through the party for Scotty Moore. Malvin Gipson, the CVB's director of sports sales, incurred more than $600 in charges at Blues City in 2010 and 2011 entertaining businessmen despite Kane's reported admonitions that his employees avoid the café.

"He pretty much said, ‘Don't go there,' '' said Regena Bearden, CVB's vice president of marketing and public relations. However, Blues City Café is popular among out-of-town guests and it can be hard to avoid, she said.

Despite spending at Blues City, CVB records show its entertainment spending is spread out among numbers of establishments on Beale Street, downtown and throughout the city, and Bearden said entertainment is paid with private funds.

"That is a serious conflict of interest,'' said Holman, legislative representative for Public Citizen, a Washington-based watchdog group that advocates transparency in government. A problem may involve the CVB's public-private partnership, Holman said. CVB, a nonprofit organization, receives tax dollars from local government. Kane would be held to tighter standards if CVB was converted to a government agency, Holman said.

Still, Kane's board appears comfortable with his actions.

"Kevin certainly is highly respected within his industry,'' said Harold Graeter, associate executive director of the Liberty Bowl who is serving this years as CVB's board chairman. "I don't see a concern.''